If I were in Cyprus, why would I put my
money in the bank? I can't take it out again (except at 300 EUR/day),
I can't send it abroad, and they might decide to nick some of it. So,
I think there will be a bank run, slowed only by the limits on withdrawal.

Sunday, 24 March 2013

The report Knot Yet, on the increasing age of marriage in America, has gathered plenty of mediaattention.
It's a really important topic, but I can't help be worried that in 2013, we still accept social science that makes no attempt to distinguish causality from correlation. The report rightly contains comments like: "... we cannot rule out the possibility that some of these associations
are simply due to the type of young adults who marry in their twenties." Indeed they cannot. But media reports don't bother to mention this, instead throwing around headlines like "Late Marriage and its Consequences", or phoney statements like "Upper-class women reap a large wage premium from delaying marriage", where all we can say is "Upper-class women who delay marriage have higher wages" - or, exactly equivalently, "Upper-class women who have higher wages delay marriage".
Is proper social science really so hard to do on this topic?

Friday, 22 March 2013

The rise of disability benefits in the US. Includes a cool graphic.
It seems that just as in the UK, disability has become hidden unemployment. And just as here there are incentives for governments to push this: states pay for unemployment but the federal government pays for disability. In the US there's another group - lawyers:

No one asks us to tell our story. This is everything I suffered, in the flesh. No one can obligate me to come to tell the story, no one else knows what I lived. Sorry, I didn't finish explaining something. After the massacres, my father died May 25, 1983, they bombed the place and he died.

What they wanted to do was to disappear us but thanks to God the mountains protected us, mother nature saved us. My father died and stayed in the mountains. As indigenous people we have rituals days to celebrate our dead, but on that day I can’t go to my father because he is in the mountains. I’m not at peace like before, my father does not appear. They were killed and I can’t see them any more. This pain, this sadness, I never forget it. I felt it in the flesh. There is no peace. We lost everything, our land, our animals, our clothes, but no one has replaced it. The government did it, the government is here but don’t do anything. On the contrary, they look down on us. Excuse my expression. The pain will only end when I die.

Saturday, 16 March 2013

So the story about the knowledge economy is that more and more capital is human capital, which is stored in workers' heads. This has benign political effects: human capital, unlike fixed capital or land, is quite mobile, and intrinsically difficult to expropriate. Therefore, greedy rulers (including tyrannous majorities) cannot tax it to extinction. Rulers then focus on more useful activities, like providing public goods to grow the economy. And perhaps democratization becomes easier because the threat of expropriation by the poor is less.

Here's an alternative thought. What is Google, conceptually? Of course it's very innovative and has lots of smart people. But how does Google make its money, really?

i) a huuuge server farm;
ii) some fairly well-understood algorithms to serve search results and ads, which run on the huuuge server farm;
and
iii) a guy to answer the phones at the huuuge server farm.

Everything else in Google is basically taking money out of that one big money spout. No doubt some of what they do may change the world and keep Google innovating, but the money comes from the spout. Now, to me that sounds completely expropriable. Essentially there is just a big source of rents from network externalities, et cetera, and it is waiting to be fought over. And, guess what, an increasing number of governments have started to levy big "fines" on Google for its "violations" of various vitally important rules.

More generally:

A lot of the human capital in the internet is embodied in code.

There is no reason to think that innovation in code goes on forever. There may just be one best way to do a bubble sort or build a search engine.

Friday, 15 March 2013

Here's an email from a collaborator and very smart guy. The sort of person we should be encouraging to come to Britain, if we would like to have world class universities. His experience was not exactly encouraging.

Particularly egregious bits are highlighted.

The thing is, I am not pro immigration. I think Britain should have lower immigration (not zero). I'm basically quite communitarian. But what inevitably happens, in the political system we have, is gesture politics where you make some headline number commitment. Then you have to fulfil the commitment. Doing it right would be hard. So instead you do what is easy: you target the most law-abiding, highly visible people because they are the easiest to bully. And then... well, now read on.

Hi David,
Thanks for the support! Yes, I was detained for a pretty long time, and
sent back to [first world country Z], but it was largely due to my own stupidity.
Although people still seem a bit horrified when I tell the story, so I
must inadvertently tell it in a way that understates my stupidity, so
keep that potential bias in mind. Here's the full(ish) story. It's
pretty long, sorry.
My initial plan was to go to [country X in Africa] for research, and come back about a
week before my visa expired and apply for an extension when I got home
(which is what you're supposed to do). As is typical, there were some
small issues in hiring a staff in X, which caused delays and so I
ended up staying longer than I had initially anticipated. In the end I
tried coming back into the country 4 days after my visa expired. I was
in X, and didn't have time to really research the visa situation,
and thought it's not a big deal, I have a Zian passport, I'm allowed
to enter for 6 months with a Zian passport without a visa. I really
didn't think much of it, I've entered the country without a visa many,
many times before I moved over. So, that was very naive of me.
When I got to immigration I was pretty up front and honest about the
situation; I didn't think it was going to be a problem. I told the
immigration officer that I was gone on research for a month, I lived in
the UK, I was putting finishing touches on my dissertation, and would be
visiting for 2 months (I have a conference in Z in May). She
asked questions about how much cash I had on me, why my visa was
expired, and said I couldn't enter to do school work without a student
visa. So, alright, I said, I didn't actually have school work left to
do, my dissertation is all but complete, I'm really just visiting for a
few months while I tie up some loose ends. She thought that it shouldn't
take 2 months to do this, and didn't believe that my dissertation was
complete since I was gone on research. I tried to explain that the work I
was doing was not for my dissertation. She said oh, so you have a job? I
said, no, but I expect to get one, and the work I'm doing now will help
my career when I get a job. She did not understand my motivation for
doing work that I was getting neither course credit nor money for, and
basically called me a liar (said it was "highly implausible") and so
they sent me to this room/cell thing in the bowels of Heathrow.

I waited there for a few hours, a new immigration officer came and
interviewed me, wrote everything down, I told her the same story, I was
here for a few months to tie up loose ends with my living situation, and
submit my dissertation, and I was leaving the country in May at the
latest. She told me there was no way I was going to enter the country, I
was clearly doing school work without a student visa (which is kind of
true) and they were going to send me to Nairobi because that was where I
came from.
I started making calls using my credit card to let people know what was
going on: my girlfriend, parents, etc. I had made several purchases on
my way back, in Kigali, Bujumbura, Nairobi, and now London. So of
course, while trying to make calls, my card got security blocked. My
other card had already been blocked for a few days, I hadn't worried
about it because the backup worked, but now the backup was down. So this
was pretty bad because now I was being sent to Nairobi which isn't the
safest place in the world, and I had absolutely no access to cash, not
even enough to get a cab to the Zian embassy when I got to Nairobi.
This next bit is the worst part I think: I desperately explained the
situation to the immigration officer, literally telling her that people
regularly die wandering the streets of Nairobi at night, and she said
"not my problem, is it?". That was cold. My stomach sank with the lack
of empathy. I was basically begging to go back to Z instead of
Nairobi. I was pretty scared to go to Nairobi without any money or
access to any money.
There was this guy in the cell with me (there were 7 of us) who clearly
sensed my fear/desperation. He was a Libyan guy who seemed to know the
immigration laws very well. He was there declaring amnesty, and had been
detained for almost 48hrs. He overheard the conversation, and mentioned
that his understanding was that the law said that I could go to my home
country if there was a flight before the next flight back to my
destination port, and I paid my way myself. ... So, I called
my parents, and got my dads credit card info, bought the last ticket of
the day into Z, all on the secretary's cell, and so they let me
come to Z....
So, anyway, that's it. I ended up being detained just under 12 hours. I
think the worst thing from their end is that they didn't actually ever
tell me what my options were under the law. I apparently had the legal
right to go back to Z, and despite my desperation and begging to
not go to Nairobi, it took some random stranger to tell me that I had
the legal right to be sent to my home country. I think it was pretty
unreasonable of the officer to just assume that I wouldn't be able to
figure out a way to get a flight home. I don't think that was
particularly fair treatment.
All in all, not a great travel experience. 2/10 (max) - would not recommend and would not do again.

Thursday, 14 March 2013

Fight! Fight! Jonathan Portes describes Krugman versus the European Commission.
Dani Rodrik, always worth reading, attacks political economy. I am pretty sympathetic, but will register a quibble. The -- commonly made -- argument that "endogenizing politicians' behaviour leaves analysts with no policy recommendations to make" has some force, but can be overplayed. The material and electoral interests that politicians face are real, and even quite idealistic politicians will be helped by being made aware of them.

Tuesday, 12 March 2013

LEOMINSTER popularly LEMSTER, a town, a parish, a sub-district, and
a district in Herefordshire. The town stands in a fertile valley, on
the river Lug, at the influx of two of its tributaries, and at the
commencement of the Leominster canal, adjacent to the Shrewsbury and
Hereford railway, at the junction of the Leominster and Kington railway,
13 miles N of Hereford. ...
The monastery was afterwards rebuilt as a college or priory; became a
cell to Shaston and Reading abbeys; was notable for the preaching of the
crusade in it, in 1187, by Baldwin and Giraldus;....

The town hall was built in 1856, at a cost of £3,000; is in the Italian
style, 156 feet long and 48 feet wide; has, over the centre, a lofty
cupola and clock-turret; and contains a council-chamber, 45 feet long
and 30 feet wide....
The butter-cross stood on the site of the new market-house; was built in
1633, by John Abel, "the king's carpenter;" was a curious and
beautiful example of Tudor timber-work, with 12 carved oak pillars,
arches, shields, and varions carved devices; was taken down in 1855, to
give effect to the town hall, and to afford space for the new
market-house; and has been re-erected on a large open space, called the
Grange.

And as she sees me turn around, she forces me into a conversation about
her relationship to my great-aunt. Do you know? Your great-aunt was my
class-mate, we got along greatly. When you two were class-mates, I
wasn’t even born! That’s what I think, but on the surface, I can only
bite the bullet, and at the risk of my ears breeding a silkworm, I have to let her finish....

Saturday, 9 March 2013

One of my hypotheses is that a
psychological trait, honesty, may affect certain social or economic outcomes.
The reviewer raised the legitimate point that other unobserved personality
traits, correlated with honesty, could be the real causal factor. This is
undeniable. We don’t know enough about human personality to control for everything
that can affect a person’s social relationships.

For psychological variables, though, this
just seems impossible. Even if you could run an experimental treatment to
change someone’s level of honesty (maybe an extra hour of Sunday school?), how
could you guarantee that this would not change other aspects of their
personality too? In fact, that would be extremely unlikely. A person’s
character is a complex and interconnected whole. There seems no way to rule out
unobserved heterogeneity – short of major neurosurgery, perhaps.

So it seems that if we want to investigate
human psychology, we are stuck with finding the major dimensions of personality
variation (such as the “Big Five”) via various forms of dimensionality reduction,
and then controlling for them.

It seems as if this argument should also
apply to other areas of science which study complex systems not subject to precise
manipulation – say, ecology or climate science. What can we do about that?

Saturday, 2 March 2013

"It employed a within-subjects design in which the
subjects of the experiment, U.S. senators, received one letter from a constituent taking a position
in favor of immigration reform; and a second letter from a different constituent opposing
immigration reform. By comparing how senators responded to these two letters we can identify
the frequency with which they tailor their messages to constituents with differing views on this
issue, as well as the form their targeted explanations take...."

Today I saw a presentation of a field
experiment evaluating different ways to deliver aid. One was the
standard method which had been used until that point. The other two
“treatments” were new. The evaluation was over the course of a
year. (There were lots of pictures of smiling villagers... lab guys
don't have those.)

How long do we have to wait before new
institutions settle down and we can evaluate them “in equilibrium”
– meaning, not any rigorous game-theoretic concept, but just that
people have somehow got used to them, and that all the changes have
worked through the system? In this case I felt that a year was too
little. Aid recipients are unlikely to be naïve about the fact that
new institutions are being tried and evaluated, and they may
therefore behave in a special way in the first season of a change.

I worry in general that social
scientific evaluation is too short-termist, and that the tools of
statistical analysis can encourage this. For major institutional
changes, there is a good case that the smallest possible
“independent” unit of observation is a generation. Until people
have grown up under a new system, we are not sure that its full
effects have been worked out.

In this context, advanced statistical
analysis can actually be a step backward. For example, consider this paper which estimates the effect of democracy on GDP – a
traditional hobby for political scientists. Now as everyone in the
field knows, just looking at democracies versus dictatorships and
comparing averages will not be informative, because these countries
differ in many many other ways. So instead the paper looks at the few
years before and after a change from dictatorship to democracy, and
estimates the switchover effect from that. But this is crazy, because
such massive changes to social institutions are not remotely likely
to have all their effects within a few years. After all, many
political decisions have ramifications that span decades – think of
the choice to create the NHS, or Lloyd George's introduction of old
age pensions, or Nixon's visit to China. Evaluating political
institutions after seven years is like evaluating a new fitness
regime after a week.

I can think of several cases where my
previous beliefs were probably based on too short a run of evidence.
For example, I assumed that privatization of e.g. water utilities was
a good thing, because the privatized utilities performed better than
public counterparts elsewhere. But a lot is going to depend on the
first generation of entrepreneurs who take over, and these may not be
the same as the second or third generation of entrepreneurs who
inherit the system. In the 1950s, nationalization must have seemed as
obvious as privatization did in the 1990s. I am not saying that
privatization was a mistake – I still support it – but I am less
confident of the evidence base.

My colleagues seem to be making a
similar mistake about the effect of the Research Assessment Exercise
(now the Research Excellence Framework) for UK academia. Everyone I
know who was around in the 80s, when this came in, says that it
swiftly forced a lot of unproductive, “dead wood” academics to
either shape up or leave the system. So they are basically positive
about it. (Well, Essex political scientists would be, wouldn't they?)

The question is whether it is still
having the same effect now. When a new institution is imposed, there
are two kinds of adjustment: people adjust to the institution; and
the institution is adjusted to the people. After all, nobody wants to
live under permanent revolution, so initially harsh conditions are
gradually softened, informal routines grow up that may subvert the
official rules, et cetera.

In this context it is pretty alarming
to consider the Conservatives' and then New Labour's regime of
targets for the NHS (known by some as “targets and terror”).
Again, I have heard people in the industry talk about the salutary
initial effects of having managers asking “why isn't this bed being
used”? But now look where targets and terror have got us.

If this argument is right, we will
often be unable to evaluate institutional changes rigorously until
long after the fact – even if we are doing randomized controlled
trials, which is often impossible. So, how can we decide what changes
to make in the here and now? Two things might help.

First, a historical perspective won't
tell us what will happen, but will at least give us a sense of what
can happen. Without history we are doomed to parochialism. As
Churchill said, "Study history, study history. In history lies all the secrets of statecraft."

Second, a sense of principle might
often be a good guide. Actually, another Churchill quote is relevant: "In life the only wise course is to follow the course of duty and not of interest. Every man knows what his duty is. But it is not given to many to know their true interest." To apply this to academia: we may not know, now or ever, the
true efficiency effects of such-and-such a government evaluation
framework, or of the practice in an increasing number of European
universities of – no joke – paying bonuses for top
journal publications. But every researcher should feel that the
search for truth is sacred, that it requires rigorous and demanding
standards of honesty in the muddy waters of empirical analysis, and,
therefore, that attempts to import monetary incentives, or impose
pressure to publish, should be met with great suspicion.